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This memorandum announces the 2001 annual review of special salary rates authorized under 5 U.S.C. 5305. Each agency with special rate employees must submit certifications to the Office of Personnel Management (OPM) documenting its recommendations for the adjustment of special rates. We are providing the following materials to assist you:

We have revised the short form version of OPM Form 1397 to reduce the administrative burden on agencies. We have eliminated the requirement that agencies report the number of filled and vacant positions covered by each special rate table applicable to the agency. We will instead use on-board counts derived from the Central Personnel Data File. Also, agencies may now complete a single short form for all special rate tables for which they are requesting an increase equal to the across-the-board General Schedule increase.

You must submit all annual review materials to OPM by October 15, 2001. It is important that you submit your certifications on time so we can compile and review the data and obtain a consensus among affected agencies if there are substantial differences in agency requests.

We ask agency headquarters to bring any problems encountered in implementing the annual review process to our attention as they arise. You may contact the Pay and Leave Administration Division by telephone at (202) 606-2858, by fax at (202) 606-0824, or by email at payleave@opm.gov.

The Office of Personnel Management (OPM) is conducting its annual review of special salary rates authorized by 5 U.S.C. 5305 and 5 CFR part 530, subpart C. OPM authorizes special rates for specific occupations, grades, and locations to alleviate existing or likely recruitment or retention problems. All special salary rate authorizations in effect as of September 30, 2001, are covered by the 2001 annual review.

2. Deadline

Agencies must submit all annual review materials to OPM by October 15, 2001, unless an extension is approved by OPM. Please send your materials to the following address:

OPM must review special rate authorizations in anticipation of salary adjustments to be made in the relevant underlying statutory pay schedules to determine whether an adjustment is necessary. In conducting this review, OPM relies on the reviews conducted by agencies employing special rate employees. In conducting their reviews, agencies must consider the following factors (consistent with OPM's regulations at 5 CFR 530.304):

- the former non-special pay rates of the special rate employees (to ensure that any adjustment in the special rates of pay would not cause those rates to fall below the non-special rates of pay to which the special rate employees would otherwise have been entitled);

- the likelihood that the factors leading to a statutory adjustment in pay will affect special rate employees as well; and

- other special rate adjustments that occurred prior to the date of the anticipated statutory pay adjustment.

Agencies must determine whether to recommend a percentage adjustment equal to the across-the-board adjustment that will be applied to the General Schedule in January 2002. You may recommend a different adjustment if, based on your review, you determine that conditions have changed to the extent that a particular special rate table warrants an adjustment that is less than or greater than the anticipated General Schedule adjustment. However, in such cases, you must submit certain supporting data, consistent with OPM regulations and the instructions on OPM Form 1397. (See Attachment 2 and section 4 of this attachment.)

4. OPM Form 1397

Agencies may use OPM Form 1397, Worksheet for Special Salary Rate Requests, for multiple purposes--e.g., to submit new requests for special rates, to request termination of a special rate schedule, and to document the annual review of existing special rates. (See Attachment 2.) For the purpose of the annual review, agencies may use either the long form or short form version of OPM Form 1397, depending on the type of adjustment being recommended.

Agencies requesting special rate increases equal to the across-the-board 2002 General Schedule (GS) adjustment should use the short form version of OPM Form 1397. (See Attachment 2.) The short form requires only that you identify the special rate tables for which you are requesting an increase equal to the GS adjustment and provide the required written certification. A single short form may be used to document the certification for all special rate tables for which the agency is requesting an increase equal to the GS adjustment.

Agencies requesting adjustments greater than the across-the-board 2002 General Schedule adjustment must submit additional data, in accordance with OPM regulations and the instructions on OPM Form 1397. Staffing data should cover the period from June 4, 2000, through June 2, 2001. In certain circumstances, OPM may ask agencies to submit salary survey data. (Please contact OPM before conducting salary surveys.)

Agencies requesting adjustments that are less than the across-the-board 2002 General Schedule adjustment (including a zero adjustment) must submit a written justification and any applicable supporting data, in accordance with OPM regulations and the instructions on OPM Form 1397. Such a request may be appropriate if you have determined that special rates are no longer necessary to prevent a serious staffing problem and you wish to phase out special rates by granting zero adjustments. (See 5 CFR 530.304-305.) Also, if special rates have been surpassed by locality rates, you may wish to take this fact into account in considering the need for adjustments in those special rates.

The special rate authorizations applicable to your agency are listed in Attachment 3. Please note that the six authorizations for Information Technology (IT) employees, tables 999A-F, are listed at the top of the index and are applicable to all agencies even though they are not shown in the individual agency listings.

5. Certification

The head of the department or agency must personally sign the certification for a special rate adjustment when (1) an agency is proposing to increase the special rate by more than the amount of the General Schedule increase; (2) the special rate applies to 1,000 or more positions; or (3) the increase in total expenditures (comparing the cost of the current special rates before the adjustment with the cost of the projected special rates) is $4 million dollars or more. In all other cases, a headquarters official designated to act on behalf of the head of the department or agency may sign the certification.

6. Procedures

Each agency is responsible for providing to OPM one or more certifications (on an OPM Form 1397) covering all special rate authorizations applicable to the agency. If there are substantial differences in agency recommendations, OPM will designate a lead agency (usually the agency with the largest number of covered employees). OPM will be the lead agency for worldwide/nationwide authorizations. The lead agency will be responsible for obtaining a consensus from the major agencies involved and submitting a final recommendation for that authorization. We expect each agency covered by an authorization to cooperate with the designated lead agency in attempting to reach a consensus.

7. Effective Date

Adjustments in special rates resulting from this year's annual review will take effect on the same date as the across-the-board General Schedule pay adjustment--i.e., the first day of the first applicable pay period beginning on or after January 1, 2002. If there is no across-the-board General Schedule adjustment in 2002, the amount of the special rate adjustment will be zero, unless an increase greater than the General Schedule increase is requested and approved. Any such increase will take effect on the first day of the first applicable pay period beginning on or after January 1, 2002. However, OPM may authorize new authorizations and changes in existing special rates at any time during the year if all the normal criteria for establishing or adjusting special rates are met.

8. New Requests Not Part of the Annual Review

Agencies should indicate how requests to establish a new special rate schedule submitted between October 1 and December 31, 2001, relate to the anticipated 2002 General Schedule adjustment.

9. Requests for Reduction or Termination of Special Rates

Agencies may request to reduce or terminate special rates as part of the annual review process. However, under current law, the reduction or termination of a special rate may result in an increase in an employee's total pay. This is because the reduction or termination of special rates triggers the pay retention provisions of 5 U.S.C. 5363 and may result in locality pay being paid on top of employees' current pay (if converted to a General Schedule rate or a retained rate). Therefore, OPM advises agencies to consider phasing out special rates that are no longer necessary by providing for annual adjustments that are less than the across-the-board General Schedule pay increase.

Termination of a special rate schedule may be appropriate if there are no longer any employees covered by that schedule. In this case, the affected agency or agencies should provide a letter signed by an authorized official that requests the schedule termination and explains that there are no covered employees. (OPM Form 1397 is not required.)

Any agency contemplating a request for reduction or termination of a special rate schedule with covered employees should contact OPM's Pay and Leave Administration Division for additional information and instructions.